Senator: AT&T/T-Mobile merger an “unreasonable risk to the economy”

Senator Al Franken is back in the trenches, telling the FCC and Department of …

The United States Senator who fiercely opposed Comcast's acquisition of NBC Universal is back in the trenches again, this time inveighing against AT&T's proposed buyout of T-Mobile USA.

"Americans gather their information about the world, purchase products and services, work, and communicate largely through the wired and wireless information infrastructure," Senator Al Franken's (D-MN) 24-page letter to the Federal Communications Commission and Department of Justice contends.

"Allowing two companies to control which websites and applications are available to consumers and what content will stream at a faster speed would be very risky. We should not let an effective duopoly dictate the rules of the road for wireless networks, and I fear that will happen if this merger is approved."

The FCC and DoJ have been entrusted with considering the proposed $39 billion union. Franken pretty much throws the book at the idea. His letter disputes AT&T arguments that the telco needs T-Mobile's network resources to roll out 4G broadband to most of the country. And he suggests that the marriage would stifle innovation, cause job losses, raise retail prices, and undermine the prospects for effective net neutrality rules.

The merger would also cripple competition in the national wireless market, allowing AT&T and Verizon to exclude rivals, the Senator insists. "It would create an unreasonable risk to the economy to entrust too much power over such a crucial industry to a company that has a history of market domination."

Troubling steps

Franken's missive follows a series of mixed signals from his political party. About a week ago three House Democrats issued a statement calling the merger "a troubling backward step in federal public policy." They were joined a day later by Senator Herb Kohl (D-WI). But other Democrats, such as North Carolina Representative G.K. Butterfield and Gene Green of Texas, support the merger—as does the traditionally Democratic-leaning Communications Workers of America.

The latest statement also comes following the FCC's temporary suspension of its AT&T/T-Mobile merger review process. Last week the Commission announced that it had been informed by AT&T that the telco has developed "new models" to "bolster its arguments concerning the size of the efficiencies made possible by the merger as weighed against the potential anti-competitive effects."

As a consequence of that disclosure, the agency announced that it had stopped its "informal 180-day clock" on the merger review "until we have the information required to evaluate these models."

AT&T filed economic analysis comments on Monday, but Franken obviously isn't watching the clock to make his views known. His letter contends that in an environment in which AT&T and Verizon would serve 82 percent of national, post-paid wireless subscribers, Sprint's days as the third market share carrier would be numbered, even further concentrating the industry.

"I also fear it would only be a matter of months before Sprint is so marginalized that it becomes an acquisition target," following a merger, Franken warns:

Handset manufacturers and technology innovators would not be interested in developing hardware that only Sprint could use, and Sprint's customers would face significant problems when traveling because their handsets would be technically unable to roam on other networks. In addition to these disadvantages, AT&T and Verizon would be in a very strong position to use their superior resources and spectrum to push Sprint out of the business.

Jobs and prices

The letter treads more cautiously when it comes assessing the impact that the merger might have on jobs in the telecommunications sector. Franken acknowledges the CWA's arguments that AT&T's acquisition of T-Mobile could create "as many as 96,000 jobs," and give the latter telco's workers an opportunity to gain collective bargaining rights (since the larger company recognizes unions).

"I care a tremendous amount about creating and protecting American jobs, and if this merger is approved, I recognize that T-Mobile workers will finally have the benefit of union representation, which is long overdue," Franken notes. But the statement also expresses concern that the acquisition could instead result in the termination of jobs.

The merger of AT&T and T-Mobile would likely involve thousands, perhaps even tens of thousands, of layoffs. Despite having been asked directly by me and several other members of Congress to provide estimates of the number of layoffs AT&T is expecting to result from the merger, AT&T has refused to release this information. According to recent reports, AT&T employs 266,590 people and T-Mobile employs 37,795. AT&T has calculated that it will reap $3 billion per year in "operational savings" and "cost synergies" as a result of the merger. While it will not discuss what portion of these "synergies" comes from the elimination of jobs, I think it is fair to assume that layoffs constitute a substantial portion of the cost savings AT&T is promising to its investors.

And whatever gains in employment status were made would be overshadowed by what Franken sees as a major consequence of the merger, a "significant rise" in mobile subscription and retail device prices. The logic here is that T-Mobile offers "consistently lower" prices than AT&T. Thus the smaller telco functions as a competitive check, preventing AT&T's rates from "creeping ever higher."

The letter cites a think tank study suggesting that retail prices could double for both T-Mobile and AT&T customers following a merger.

"Without T-Mobile, the market would have no effective check on price increases or technological stagnation by AT&T and Verizon," Franken's section on consumer prices concludes. "Sprint places very little pressure on the prices of AT&T and Verizon, because it charges only marginally less than they do. The elimination of the lowest cost national wireless option likely explains why so many T-Mobile customers are opposed to this deal."

Matthew Lasar
Matt writes for Ars Technica about media/technology history, intellectual property, the FCC, or the Internet in general. He teaches United States history and politics at the University of California at Santa Cruz. Emailmatthew.lasar@arstechnica.com//Twitter@matthewlasar